Cimarex Energy Co. (XEC - Free Report) looks compelling at the moment. Given the company’s strong fundamentals, it seems like this is the right time to add the stock to your portfolio.
Based in Denver, CO, Cimarex is an independent oil & gas exploration and production (E&P) firm. The company’s operations are located primarily in Oklahoma, Kansas, Texas and New Mexico. Its E&P activities primarily take place in two areas: the Permian Basin and Mid-Continent region. Notably, the company currently has a Zacks Rank #2 (Buy), which means that it is poised to outperform the market.
Let’s delve deeper to analyze the factors that make this upstream energy player an attractive investment option at the moment.
Cimarex boasts significant acreage and presence in the prolific Permian Basin and Mid-Continent region. Last year, the company’s output levels from the Permian and Mid-Continent regions grew 19.9% and 12.4%, respectively. Production from these areas is expected to significantly surge in the coming quarters as well. Notably, in 2019, the company plans to invest $1.1-$1.2 billion for drilling and completion of 83 net wells, of which 66 are from the Permian Basin. As a result, around 85% of its total drilling and completion capital will be directed toward the Permian Basin.
For 2019, the company’s production is expected in the range of 260-275 thousand barrels of oil equivalent per day (MBoe/d), much higher than the 2018 level of 251.3 MBoe/d. For the second quarter, the company’s output is expected in the range of 263-275 MBoe/d. This higher output is expected to lead to increased revenues. For 2019, the company is expected to record revenues of $2.6 billion, up 11.2% year over year.
Cimarex displays a healthy balance sheet with low leverage and high liquidity. The debt-to-capitalization ratio of the company stands at 34.5%, significantly lower than the industry’s 43.1%. This will provide Climarex with ample financial flexibility for future growth projects.
The factors stated above make the stock a rewarding one. But one should consider estimate revisions and earnings history, along with strength in operations to understand its true potential.
Earnings History & Future Prospects
The company beat estimates twice in the trailing four quarters, delivering average positive earnings surprise of 7.2%.
The Zacks Consensus Estimate for second-quarter earnings has moved upward from $1.31 per share to $1.48 in the past 60 days. Climarex witnessed 14 upward revisions by firms during the said period. Hence, this energy stock offers substantial upside potential.
Other Stocks to Consider
Other top-ranked players in the energy space include Apache Corporation (APA - Free Report) , Hess Corporation (HES - Free Report) and Holly Energy Partners, L.P. (HEP - Free Report) . All these companies carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apache’s earnings beat estimates in all the trailing four quarters, with the average being 31.1%.
Hess’ earnings are expected to soar more than 127% through 2019.
Holly Energy’s earnings growth is projected at 6.5% through 2019.
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